BUSINESS

Stournaras warns not to repeat mistakes of past in post-bailout era

TAGS: Finance

After Monday's exit from the bailout programs which kept her afloat and in the eurozone since 2010, Greece is on the verge of returning to normality, but challenges remain, Bank of Greece Governor Yannis Stournaras told Xinhua.

The country's political system should not fall back to the old bad habits that led to the crisis, the central banker warned.

"After eight years of crisis and three economic adjustment programs, Greece exits a long period of uncertainty and is on the verge of retuning to normality," Stournaras said in a written statement on Tuesday.

According to the bank's estimates, GDP growth is expected at 2 percent and 2.3 percent for 2018 and 2019 respectively, while the fiscal situation has improved significantly, with a primary surplus in 2017 exceeding 4 percent of GDP, he noted.

The current account deficit, which used to be as high as 15 percent of GDP in 2008, has also disappeared. Unemployment is falling, tax collection has improved a lot, banks are consolidated and recapitalized, and labor and product markets have been liberalized, the Greek official added.

Still, Greeks face fundamental economic challenges, Stournaras stressed.

Public debt is very high (178 percent of GDP), nonperforming exposures must be radically reduced and high taxation is discouraging investors, who are also facing red tape and a constantly shifting legislative and regulatory framework in Greece, he explained.

"Public sector needs a lot of improvement, we have to make more efforts in privatizations and in liberalizing the energy sector, but the most important of all is to strengthen our institutions and respect their independence," he said.

The definitive proof that the Greek economy has turned a page will come after the successful return to the international sovereign bond markets, the central banker underlined.

"Investors are watching us, as they are checking if we honor our commitments in full and if we implement all the measures agreed with our creditors," he said.

"As we are approaching elections, our political system should not repeat mistakes of the past and fall back to the old bad habits, like the irresponsible fiscal policies that led us to the crisis 10 years ago. This would be a disaster and would show disrespect to the sacrifices made by the Greek people," Stournaras stressed.

As Greeks are now on their own, without the protection of a program, and with a lot of economic and political uncertainty surrounding them, they have to show to the world that they can deliver their promises, he explained.

"Otherwise, the markets will abandon us and that's something we have to avoid," he said.

A sudden increase in the borrowing cost could endanger the recovery and could increase the debt servicing cost.

"It is wrong to assume that the Eurogroup decision of June 21 would be enough to assure our exit to the markets. Although this decision ensures the sustainability of Greek public debt in the medium term, in order to gain market confidence in the long term, we must continue with the full implementation of reforms and keep up with the fiscal effort for many more years," Stournaras stressed.

[Xinhua]

Online